If you’ve been thinking about a new career or have started a part-time job to earn extra money, you may have considered becoming a real estate agent.
Being a realtor is great if you like houses and enjoy working with people, but it’s not always the dream job that some make it out to be. It’s a common misconception that real estate agents make tons of money doing little to nothing.
Selling real estate is more work than you might realize, and while there are some very successful real estate agents, many struggle to make ends meet.
From someone in the business, here’s what it takes to be a real estate agent and what you should consider before you start on your path to selling homes.
Job Overview for Real Estate Agents
- Average salary (as of 2021): $48,770
- Projected Employment Growth: four%
- Education Required: Real Estate Courses and Licensing Exam – Hours of study and licensing requirements vary by state.
- Responsibilities: Help clients buy, sell and rent properties
- Working environment: Often irregular working hours – may be self-employed or work through a brokerage house.
Source: US Bureau of Labor Statistics.
Real estate agent vs real estate broker: what’s the difference?
BUT real estate agent is someone who is licensed by their state to help people buy and sell real estate. To become an agent, you must complete a certain number of real estate courses and pass an exam. Requirements vary by state, but typically include several classes in real estate law, real estate math, and real estate principles.
BUT real estate broker this is someone who has taken their education one step further and also passed the broker’s exam. In most states, real estate brokers can own their own business, hire real estate agents to work for them, and manage properties. Brokers usually have more experience than agents and can charge higher fees as a result.
4 steps to becoming a real estate agent
Here is what it takes to become a real estate agent and what factors you need to consider in the process.
1. Plan for the money and time you will need to obtain a license
The first thing you need to do if you want to sell a house is to get a real estate license. Go to your state Department of Real Estate or Bureau of Real Estate website and find a list of approved online or in-person real estate courses. Some people prefer the flexibility of online classes, while others are better off focusing away from home in the classroom. In any case, you can expect to study for at least a few months to a year.
After you complete the classes, you will be able to take the official state test to become a licensed real estate seller. The test is not cheap, so be sure to study it well before registering (in California, for example, the test costs $60, and the license is $245).
Before investing significant time and money in a realtor course, you can take an introductory course on Udemy on selling or investing in real estate. Courses range from free to about $35. They won’t count towards licensing, but are an inexpensive way to test the waters.
Read more: Should you go back to school as an adult?
2. Decide where you want to work
New real estate agents almost always work under the supervision of a broker. Real estate brokers offer agents marketing support and legal protection. When deciding where to hang your hat, talk to at least three different brokerages to get an idea of how they operate.
Some agents prefer large brokerage companies because well-known company names inspire confidence in them. Other agents like family stores because they are more flexible when it comes to working from home and choosing their own suppliers.
3. Calculate start-up costs
Even if you work under the umbrella of a broker, real estate agents are independent contractors. You can write Coldwell Banker or RE/Max on your business card, but you must purchase these business cards yourself. Other common expenses include sale signage, open house signage, and a basic website.
Budget around $1,000 for these promotional start-up costs. As your business grows, you can advertise more. Schedule annual real estate association and board fees and membership fees to become part of your local Multiple Listing Service (MLS).
Most new agents start out with buyers rather than accepting listings. All this house-hunting is going to mean a lot of gasoline burning on city trips.
Read more: How do you know if you are financially ready to start a business full-time?
4. Set your boundaries
It can be difficult for a new real estate agent to manage time, especially if you have other jobs or young children.
House shows are mainly held in the evenings and weekends, so unusual hours pass with the territory. This makes the property attractive as a part-time job or for working parents, but remember that it is not uncommon for buyers to call asking to view a property with a few hours’ notice.
I recommend setting boundaries. You can record a response message on your mobile phone, which will be something like:
“Hi, this is Sarah Davis. If you call Monday to Saturday between 8:00 am and 6:00 pm, I am on the other line and will call you back as soon as possible. If you call on a Sunday or in the evening, I will call you back the next business day.”
Even then, you may have to make exceptions during negotiations. Get ready.
How much can I earn as a real estate agent?
Real estate is a commission business. And commission work is a feast or a famine.
You can—and will—go for months without a paycheck. You need to learn how to budget for irregular income.
But unlike W-2 jobs, a commission job like a real estate agent or broker has unlimited income potential. Some agents make over a million dollars a year. You get back in income what you have invested in this effort and time.
So, how much can you really earn? Commissions are usually paid by property sellers and are negotiable by law. Some listing agents receive 2.5% of the contract purchase price and offer the same to buyer agents, but this amount varies.
For example, we will use 2.5%.
If you are selling a home for $300,000, 2.5% of the purchase price is $7,500.
You will then separate your brokerage (which is how the broker makes money by letting you use their offices and branding). New agents generally have to give more to their brokers because they require more training. Let’s say you have a 70/30 split with your brokerage. This leaves you with $5250.
So, $5250 for one house. Not bad, you might think. But don’t forget how long it took to earn that money. The escrow is usually 30 days, and if you’re representing a buyer, you may have spent weeks driving them around all day to view the property.
If you want to make a modest $60,000 a year, you need to sell an average of $300,000 a house every month.
Read more: How much money should you save each month?
Can I sell real estate part-time?
Yes. In fact, I recommend everyone to start that way.
The hardest part of building your real estate business is getting clients. It will take a lot of time. If you dive into real estate completely – putting all your money into training and start-up needs – it could take you six months to sell your first home.
Being a real estate salesperson can also be a great career for mothers of young children because it’s somewhat flexible. You can work from home part of the time (sending emails, making calls, doing online marketing, and other tasks) and then assigning a spouse or babysitter to babysit while you go to shows.
Finally, some people keep their real estate license just so they can buy and sell their property and represent a family member from time to time.
Pros and cons of being a real estate agent
Like any career, real estate has its ups and downs. Here are some of the pros and cons of working as a real estate agent.
Pros:
- Flexible schedule. If you have family or other responsibilities, you can adjust your schedule to suit your needs.
- You help people make their dreams come true. Buying a new home is one of the most exciting experiences in people’s lives and you can be a part of it! Helping people achieve their own home dreams can be damn rewarding.
- No two days are the same. You will meet new people, see different houses and learn about new neighborhoods every day.
- You can earn a lot of money. If you work in a highly profitable industry and are good at what you do, real estate can be a very lucrative career. According to the Bureau of Labor Statistics, the median annual income of real estate agents and brokers in 2021 was $48,770, but the top 10% of real estate agents made over $102,170 and the top 10% of brokers made $176,080.
Minuses:
- You must spend money before you earn money. To become a real estate agent, you will need to take courses and get a license, which will cost you upfront. You will also need to invest in start-up expenses such as business cards, signage, and a website.
- You are always in touch. Flexible hours can be great… as long as you don’t start getting phone calls when you’re having dinner with friends or putting the kids to bed. If your clients are involved in a bidding war, you will need to go over to their side.
- It’s a feast or a famine. When the housing market is good, it can be really good. But when it’s slow, your income can suffer.
- You need to deal with rejection. Not every lead will turn into a sale, and not every offer will be accepted. If you’re not ready for some rejection, this job may not be for you.
bottom line
Real estate can be a great career for the right person. If you are interested in real estate and think you have what it takes to be successful, your best bet is to start part-time while keeping your full-time job. This way you can see if a property is right for you before you quit your job and go for broke.
If you decide to become a real estate agent, remember that it is important to have a sound business plan. You will need to set some goals and develop a marketing strategy. You also need to have a good understanding of your local real estate market and the areas where you will be working. And of course, make sure you are always learning and staying up to date with the latest real estate news and trends.
Becoming a real estate agent can be a great way to reach your financial goals, but it’s not for everyone. Be sure to do your research and talk to other real estate agents before making a career decision.
